Sixteen million individuals in the USA suffer from diabetes mellitus, 1-2 million of which have type 1 (juvenile) diabetes in which the insulin-producing f3-cells in the pancreas are nearly completely destroyed by autoimmunity. Attempts to successfully transplant islets to diabetic subjects have been largely disappointing. We hypothesize that the lack of successful engraftment is due to the situation in which mature Beta cells in the islets are mostly postmitotic, are undergoing senescence, and that successful engraftment requires the neogenesis of new B-cells from stem cells that reside within the islets. We have identified and isolated pleuripotential stem cells from rat and human pancreatic islets. Therefore we propose an eventual approach whereby freshly isolated islets are precultured for several days with growth factors to expand the population of stem cells in the islets prior to their transplantation. To justify such an approach we propose in this exploratory/developmental application to demonstrate successful engraftment of human islet-derived stem cells transplanted to streptozotocin-induced diabetic and NOD diabetic mice. In initial studies we have successfully isolated nestin-positive stem cells from human (and rat) pancreatic islets, have expanded them ex vivo, and have successfully engrafted them in nonimmunosuppressed C57B16 mice under the renal capsule. A remarkable property of these islet-derived stem cells is that they appear to be immunologically blinded, do not undergo graft rejection, and do not express either class I or class II major histocompatibility complex (MHC) antigens. Even more remarkable is that the human tissue grafts express both human-specific class I and class II antigens, but are recognized by the mouse as self and do not undergo host vs. graft rejection. Further, the human NIPs are pleuripotential they differentiate into hepatic, neural, ductal, hematopoietic and adipocyte tissues phenotypes. We propose in this exploratory! developmental research application that morphogens in the mesenchymal niche provided by the engraftment of NIPs under the renal capsule differentiated the NIPs into multiple tissues but are inappropriate for Beta-cell differentiation. As proposed in this application, transplantation of NIPs directly into the pancreata of STZ-induced and NOD diabetic mice will differentiate NIPs into Beta-cells and permanently cure the diabetes.